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Regional Unemployment in Transitional China: A Theoretical and Empirical Analysis

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  • Zhongmin Wu

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Abstract

The purpose of this paper is to explain the pattern of regional unemployment in transitional China. A model is developed to explore how urban unemployment in the provinces is influenced by peasants' wages, formal sector wages, and the size of the formal sector. Evidence from panel data suggests that a significant indicator of high unemployment rates is greater Urban–Rural Income Inequality within the province. The hypothesis is that the urban–rural income gap produces migration, and more rural migrants substitute for urban workers, causing further urban unemployment. Since the economic reforms began in 1978, the non-state owned enterprises have been carrying an increasing weight in the economy, and they have contributed significantly to the rapid economic growth of China. Empirical evidence shows that economic reforms have reduced unemployment. The provinces that are still heavily dependent on the state sector are therefore more likely to experience higher unemployment. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Zhongmin Wu, 2003. "Regional Unemployment in Transitional China: A Theoretical and Empirical Analysis," Economic Change and Restructuring, Springer, vol. 36(4), pages 297-314, December.
  • Handle: RePEc:kap:ecopln:v:36:y:2003:i:4:p:297-314
    DOI: 10.1023/B:ECOP.0000038297.99560.44
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    References listed on IDEAS

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    1. Viren, Matti, 2001. "The Okun curve is non-linear," Economics Letters, Elsevier, vol. 70(2), pages 253-257, February.
    2. Gustman, Alan L & Steinmeier, Thomas L, 1981. "The Impact of Wages and Unemployment on Youth Enrollment and Labor Supply," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 553-560, November.
    3. Fleisher, Belton M. & Yin, Yong & Hills, Stephen M., 1997. "The role of housing privatization and labor-market reform in China's dual economy," China Economic Review, Elsevier, vol. 8(1), pages 1-17.
    4. Sebastian Edwards & Alejandra Cox Edwards, 2000. "Economic reforms and labour markets: policy issues and lessons from Chile," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 181-230, April.
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    Cited by:

    1. Jan Fidrmuc & Shuo Huang, 2013. "Unemployment, Growth and Speed of Transition in China," CESifo Working Paper Series 4410, CESifo Group Munich.

    More about this item

    Keywords

    China; income gap; migration; panel data; unemployment;

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